Adam Glapiński, head of the National Bank of Poland (NBP), was speaking after the Polish central bank's rate-setting Monetary Policy Council left interest rates intact in the middle of last week.
He told a news conference in Warsaw on Thursday that there could be room for an interest rate cut, but added that this would likely be a one-time adjustment rather than the start of a series of cuts.
He told reporters that, in an optimistic scenario, there could be two rate cuts this year, each by 0.5 percentage points.
He predicted that inflation would continue to decline in the coming months.
For now, inflation remains elevated, he said, but it is significantly lower than the National Bank of Poland had initially expected.
He also pointed to a decline in core inflation, slowing wage growth and lower oil prices as additional factors supporting a potential rate cut.
"Interest rates can fall when inflation falls—when it is closer to the inflation target," Glapiński said, referring to the central bank's target of 2.5 percent, plus or minus 1 percentage point.
"When inflation begins falling ‘head over heels,’ at some point we can make an adjustment and cut interest rates," he told the media.
He declared that, if economic conditions remain favourable, interest rates could ultimately drop to around 3.5 percent next year, state news agency PAP reported.
The Monetary Policy Council left interest rates unchanged last Wednesday, keeping the reference rate at 5.75 percent.
The panel earlier slashed key interest rates by a combined 100 basis points, amid signs of subsiding inflation.
In 2021 and 2022, the Monetary Policy Council delivered a string of rate hikes in an effort to contain surging consumer prices.
Inflation in Poland stood at 4.9 percent in year-on-year terms in March, according to a flash estimate by the country’s statistics office.
The Polish central bank predicted in its latest Inflation Report, released on March 14, that inflation would average at 4.9 percent in 2025, followed by 3.4 percent in 2026 and 2.5 percent in 2027.
(gs)
Source: IAR, PAP